The State Pension is a regular payment from the government that you can claim when you reach State Pension age. Not everyone gets the same amount and how much you get will depend on your National Insurance (NI) record. If you’re looking to review your income requirement in retirement, it’s a good idea to include your State Pension.
Here, we’ll take a look at the State Pension, who qualifies for it, identify what the Pension triple lock is, and how you can safeguard your retirement income.
Who qualifies for the new State Pension?
To qualify for the new State Pension, you must have paid or been credited with National Insurance contributions. These contributions are typically made through employment, self-employment or if you are in receipt of National Insurance Credits.
You can claim the new State Pension when you reach State Pension age (right now, the State Pension age is 66, increasing to 67 in 2028) if you have at least 10 qualifying years of National Insurance contributions and are:
- A man born on or after 6th April, 1951.
- A woman born on or after 6th April, 1953.
If you were born before these dates you’ll get the old State Pension(1) instead.
A qualifying year is one where you earn over a certain amount and pay National Insurance, you make voluntary National Insurance Contributions, or you are credited with National Insurance Credits. You need at least 10 qualifying years to get any State Pension, but 35 years are required for the full new State Pension.
The full new State Pension increased by 8.5% to £221.20 a week or £11,502.40 a year for the 2024/25 tax year.
How to claim the State Pension.
The State Pension is not paid automatically. You need to claim it either online, by phone, or by post. You’ll receive a letter from the government about four months before you reach State Pension age, informing you of your options.
You’ll need:
- The date of your most recent marriage, civil partnership or divorce.
- The dates of any time spent living or working abroad.
- Your bank or building society details.
- Any social security numbers that you have for foreign State Pension schemes.
If you’re applying online(2), you’ll also need the invitation code from the letter about getting your State Pension.
What if you wish to claim the State Pension but continue working?
You need to be aware that the State Pension is taxable, so when added to your earnings it may put you into a higher tax band. However, when you reach State Pension age, you won’t have to pay National Insurance anymore – even if you keep on working.
What is the triple lock in relation to the State Pension?
The triple lock is closely linked to the State Pension and it’s a form of protection that ensures your State Pension does not lose value due to inflation. The triple lock is a mechanism that automatically increases the State Pension annually by the highest of:
- Inflation (as measured by the Consumer Prices Index).
- Average earnings growth or
- 2.5%.
These guarantees help protect the value of the State Pension against inflation, increases in the cost of living and ensures that your spending power will not diminish over the course of your retirement.
The triple lock: what lies ahead?
Since its introduction in 2011, the triple lock has increased the value of the State Pension relative to process and earnings, as well as the cost to the government for providing it.
Whilst the law requires the State Pension to rise by at least the increase in earnings growth, the triple lock isn’t enshrined in law and it’s just a commitment made and supported by all three major political parties in their manifestos since it was introduced.
Critics, including the like of the International Monetary Fund, argue that the triple lock is becoming increasingly unaffordable for the government.
For this year’s Spring Budget, the DWP’s forecast was that expenditure on State Pensions would be £124 billion in 2023/24, rising to £158 billion in 2028/29(3).
According to DWP benefit statistics(4) for August 2024, there were 12.7 million people receiving State Pension at May 2023.
The Institute for Fiscal Studies (IFS) believes that a long-term plan is needed for the level of the State Pension. One suggestion, from their June report(5), is where the government decides on the appropriate level of the State Pension and then increases it to keep up with average earnings growth in the long run, but also commits to increase it by at least at the rate of inflation every year.
Safeguarding your retirement income.
While the triple lock and State Pension provide a foundation, relying on them alone may not be sufficient for a comfortable retirement especially if your aspirations exceed basic living standards.
A Personal Pension may help you to take an active step in adding to your overall Pension income and potentially make retirement more comfortable for you.
The money you contribute benefits from tax relief(6) and is put into your chosen investments that aim to grow your money. However, investments can fluctuate in value and you may get back less than you invest.
The main benefit compared to the Workplace Pension is you can pick where to invest your money with the aim to maximise growth. For example, in our True Potential Pension(7) you can invest in a range of globally diversified portfolios.
You may also wish to consider opening an ISA as a solution for retirement savings.
ISAs allow tax-free growth with flexible access to funds – you won’t pay Income Tax or Capital Gains Tax on the money inside your ISA, no matter how much it grows.
A financial adviser can also set you up with the technology and tools to better manage your Pension for your retirement. You can also receive free, impartial guidance on Pensions and retirement from Moneyhelper(8). With investing, your capital is at risk.
Managing your Pension for a better retirement.
There are a few things you can do to manage your Pension, from setting a clear goal and making regular contributions that you can afford, to using the latest technology and tracking your investments through the True Potential mobile app and desktop site.
If you’re a True Potential Wealth Management client and have any queries about managing your Pension, you can speak to one of our financial advisers or call our Relationship Management Team on 0191 500 9164.
They’re available 7am-8pm on weekdays and 8am-12pm on Saturdays.
If you do not currently invest with True Potential and would like to find out how we can help you do more with your Pension, contact us today – we are happy to speak through the available options and help you do more with your money. Please call one of our experts on 0191 625 0350 to get started.
With investing, your capital is at risk. Investments can fluctuate in value and you may get back less than you invest. This material is not a personal recommendation or financial advice and the investments referred to may not be suitable for all investors.
Tax is subject to an individual’s personal circumstances and tax rules can change at any time. ISA eligibility and tax rules apply. Pension eligibility and tax rules apply. You should ensure your contribution does not result in your total Pension contribution within the tax year exceeding £60,000 or 100% of your earnings, whichever is lower.
Sources
1 https://www.ageuk.org.uk/information-advice/money-legal/pensions/state-pension/basic-state-pension/
2 https://www.gov.uk/get-state-pension
3 https://www.economicsobservatory.com/can-the-uk-afford-the-triple-lock-on-state-pensions#:~:text=For%20the%20spring%20budget%20of,Hobson%20et%20al%2C%202023).
4 https://www.gov.uk/government/statistics/dwp-benefits-statistics-august-2024/dwp-benefits-statistics-august-2024
5 https://ifs.org.uk/publications/pensions-five-key-decisions-next-government#:~:text=A%20better%20way%20forward%20is,rate%20of%20inflation%20every%20year.
6 https://www.gov.uk/tax-on-your-private-pension/pension-tax-relief
7 /investments/personal-pension/
8 https://www.moneyhelper.org.uk/en/pensions-and-retirement
